Correlation Between IAR Systems and Fabege AB

Can any of the company-specific risk be diversified away by investing in both IAR Systems and Fabege AB at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining IAR Systems and Fabege AB into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IAR Systems Group and Fabege AB, you can compare the effects of market volatilities on IAR Systems and Fabege AB and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in IAR Systems with a short position of Fabege AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of IAR Systems and Fabege AB.

Diversification Opportunities for IAR Systems and Fabege AB

0.58

Correlation Coefficient

IAR Systems  Fabege AB

Very weak diversification

The 3 months correlation between IAR and Fabege is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding IAR Systems Group and Fabege AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fabege AB and IAR Systems is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on IAR Systems Group are associated (or correlated) with Fabege AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fabege AB has no effect on the direction of IAR Systems i.e., IAR Systems and Fabege AB go up and down completely randomly.

Pair Corralation between IAR Systems and Fabege AB

Assuming the 90 days trading horizon IAR Systems Group is expected to under-perform the Fabege AB. In addition to that, IAR Systems is 1.52 times more volatile than Fabege AB. It trades about -0.09 of its total potential returns per unit of risk. Fabege AB is currently generating about -0.03 per unit of volatility. If you would invest  8,950  in Fabege AB on October 20, 2024 and sell it today you would lose (590.00) from holding Fabege AB or give up 6.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

IAR Systems Group  vs.  Fabege AB

IAR Systems Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IAR Systems Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fabege AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fabege AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fabege AB is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IAR Systems and Fabege AB

The main advantage of trading using opposite IAR Systems and Fabege AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IAR Systems position performs unexpectedly, Fabege AB can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fabege AB will offset losses from the drop in Fabege AB's long position.

The idea behind IAR Systems Group and Fabege AB pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.